Africa's Battery Storage Opportunity - Energy Storage Africa

Africa has some of the best renewable energy resources in the world. Less than 8% of its hydro power has been tapped. In Malawi, fewer than 1 in seven people are connected to the grid. The demand for power is not a forecast.

It's already there and yet capital is slow to follow. The problem is perception. Africa reads as high risk. But does the risk coverage investors demand always reflect the risk that's actually on the table?

Michael Cupit develops projects in Sub-Saharan Africa. He spent years working inside the gap between how these markets look from the outside and how they actually operate on the ground. Before we move on, a lot of people listening will have follow-up questions after an episode like this. What does storage growth actually look like in your markets?

And these are exactly the questions Ko, Modo Energy's AI analyst is built for. Try it out now. Link in the description. Back to the episode.

I'm your host Ed Porter. Welcome back to Transmission. Hello Michael and welcome to Transmission. Hi.

Thank you. Thanks for having me. And let's get straight into this. Right. So this episode's going to be all about energy projects in Africa.

What is the one thing that people always get wrong about energy projects in Africa? Um, I think there are two things as far as I can see, right? I think the first is, um, probably how difficult of a place it is to actually do business. And if you're, you know, fresh off the boat kind of thing, it's a bit daunting.

But actually, when you get kind of stuck in, you roll up your sleeves, um, then it's pretty much the same as doing business here. people are, you know, open for meetings, you know, and, you know, they'll generally work with you to do something that's constructive that helps their country. So, you know, it's not a difficult place to do business. There's no more red tape there than there is here.

You've just got to know what it is, right? So, that's kind of the first part. I think the second bit is probably also just returns. Um I think everybody probably has a view of it being a place of you know you make bountiful you know returns on capital that's invested and actually you can make a little bit more than you can make here and that's a challenge which perhaps we'll come on to later just around the financing.

You know typically you know mid to high teen returns is all that we can get. Certainly nothing starting with a two unless we're willing to take an awful lot of risk which again comes back to being challenging for the financing. So I think for me you know the biggest misconceptions are probably those two two things which is good and bad. Yeah I it seems like a real surprise right to be looking at mid- teens IRRs but I think that's a lot of like my bias that I see a lot of projects in Germany GB US Australia that seem to be if I had 100 people that work in battery projects that I know I probably say like 95 of them are in those markets and then the emerging markets is only a real handful.

Yeah. Yeah. Yeah. No, I'd agree. I think I think the difference though is just the balance of risk in those contracts.

So GB Germany, US you know they are partly contracted, partly merchant. So you know you'd expect you know to get beyond utility returns for those markets. Our projects in in Africa are all contracted, right? So we're on 20-year capacity payment type structures.

So there's still risk because you've got a counterparty risk and they've generally not got a credit rating. But you can put structures around that to make sure that it works. Um, so kind of mid to high teens, you know, on a reasonably contracted basis often with kind of multilateral bank, I'll explain that in a minute, kind of guarantees that sit behind it help you. So places like the World Bank and other institutions will will put a wrapper around it.

They'll put a risk guarantee around it which will cover most of the key risks. It costs you money quite a bit of it but ultimately it kind of it takes that risk out of the project. So um particularly places like MIGA so that's the multilateral insurance and guarantees agency which is part of the world bank provide kind of some guarantees to on a on a company by company basis and they'll cover contract risk change of contract price risk um FX foreign exchange convertability all sorts of things but that generally costs you about 1 and a half% of annual revenue to kind of insure against so it's not it's not an inconsequential amount% difference it's not huge yeah really interesting.

Let's come back on to that slightly later on. I think I think first our listeners might be thinking, okay, I'm putting on my sort of uh African battery storage journey hat and I'm trying to work out like where is Africa in this journey? What's really driving the the journey towards looking at battery projects in Africa? Um why is it changing?

How far along is it? I think I think in Africa what you've got is is you know an abundance of renewable energy, right? So only about 8% of um hydro power for example in the continent's actually tapped. Next to no solar and no wind has been built.

So you've got this kind of massive resource amongst some of the best in the world. Um and then you've got very in unstable grids to kind of back it up. Then you've got a ton of demand growth. Um in Malawi where we work there's only 14% of the population actually connected to the network.

Wow. So you've got this huge kind of demand growth. Um and then you've got the process of industrialization and and and so you know there is a lot of potential there but it's it's it it is very it is very slow. On the flip side, you know, we're in a situation where, you know, fossil fuels aren't exactly coming back into favor, but a lot of African countries are sitting on huge coal reserves, gas reserves, oil reserves, and they're kind of saying, well, you know, everybody in Europe, North America, and so on, industrialized and drove their economies burning fossil fuels.

So, why can't we do the same? So, we've got to win an argument um around the fact that renewables and batteries and other means of storage and system stabilization offer a lower cost route to that industrialization process than simply extracting and burning fossil fuels. I think that's really interesting because they used to be this kind of the the logic that for some countries and I'll use GB or Germany as an example that they're a little bit trapped because they they have this massive transmission network that they need to sort of uh provide upkeep to that is was on coal still is in some cases moving to gas and is going to sort of transition in a stagebystage process towards a more renewable dominated grid.

Sometimes people would say if you haven't already got that grid in place, you're perhaps slightly more fortunate because you can design a system that is built from a renewables first perspective. And so instead of running two gigs to this particular part of the coast that has good water access, actually instead of running that 2 gig line, you could run that line in five different places to five different solar parks and actually you could build a system from the ground up with renewables that might be cheaper and effectively skip a step. Is that is that article is that sort of argument still in vogue or is it is is that sort of No, I mean look it's on the money.

You're absolutely right. You know I mean our grid in the UK as everybody I'm sure knows was was built around you know the coal fields right and how you transport power from Yorkshire Nottinghamshire to to the demand centers. And it's it's very different um in most of Sub-Saharan Africa. I'll give a caveat to that in a minute, but in most sub Sub-Saharan African countries, the grids tend to be quite spindly um and need a lot of work.

Um you know, and if you take Lake Tana wind farm, which is I think still the biggest wind farm in in Sub-Saharan Africa at 320 megawatt, um you know, there's a 254 kilometer transmission line to connect it to the grid and from that now we're starting to kind of sprite other you know TE's from it. So the kind of the grid is being built more around sources of generation which are by their nature renewable rather than rather than fossil fuels. The exception to that is in South Africa which has got much more of a UK type model where the grid was built around big coal fired power stations um and a nuclear power station down in Cape Town.

And now as you're plugging more and more renewables in, they're getting more and more network constraints um and just kind of loading constraints. They they just can't physically get enough power down the existing lines. And that, you know, we can perhaps come on to that cuz it's quite interesting in terms of use cases for batteries. That's a very different model from perhaps you see in in in Europe more broadly because it's how do you deal with those network constraints is is kind of prime driver.

Let's then talk a little bit more about uh South Africa because we've kind of gone towards it. I think um Escom the grid operator there if you're sort of familiar with that grid outages aren't uncommon. In fact, many people will have like sort of a generator at home which will kind of be just in case the grid goes down they'll have a way of kind of bringing their lights back on at home. Is that is that more common place in in in grids?

Um and is that feels like a really good solution for rather than having diesel gen sets in all these homes like more batteries, more solar will get you through these days, right? Yeah. Yeah. No, that's right.

So, I mean, you know, it it's not just South Africa, it's kind of right across the continent. There's a lot of kind of, you know, micro grid, mini grid, rooftop type solutions. And there's quite a lot of providers of of those kind of solutions on quite clever financing mechanisms to allow households to connect in South Africa. you know, five years ago, you had a lot of what was called load shedding.

So, you know, you'd have households who were generally off the grid for disconnected for kind of four hours at a time on a scheduled basis. Um, and a lot of South Africans got fed up with that and started to put rooftop solar in with batteries to kind of help carry them through that that that 4hour period. So you know South Africa is quite interesting because the load shape is is turning more into kind of that duck kind of form where in the middle of the day you know it it you know you need less from the grid. But again coming back to their transmission system they've got long long lines running thousands of kilometers which aren't suited to connecting lots and lots of renewables.

So in in in the battery case, the first tender round that they ran through the IPP office there was was all the batteries were actually on one transmission line from the northern Cape which is kind of um Namibia western side um of of South Africa and and it runs across to how which is where Johannesburg and and Ptoria is and that's a very congested line because that's the main de demand center. Mhm. So you had a transmission line that didn't have enough capacity in it. Um and a load of renewables projects that were thumping out mainly solar during the daytime and couldn't transmit to where the the the demand centers were.

So at five substations along what is about 1,000 km transmission line they put you know 100 megawatt 4hour batteries to basically just fill them up um as as demand picks up as as the sun picks up and then they release them back into the system in the evening to keep our tank going. So there's quite a lot of that careful planning that's going on to optimize the existing infrastructure and use batteries probably actually in a quite a different way. I know we see it a little bit between Scotland and and England, but um you know a lot of it more more like that. Yeah.

And and definitely we don't see it enough, right? We we almost in GB we we don't allow the network companies to own battery storage and there's some good reasons behind that. But it's interesting to see people sort of actively trying to use storage to get the most out of transmission. It's something that we seem to have a little bit forgotten in GB.

But this episode's all about Africa. So let's let's not get into too much GB detail. Let's let's actually move towards projects that you're really delivering right now. So you've got projects in Malawi and Kenya.

Yes. Uh how did you end up sort of picking Malawi and Kenya? And then let's talk through sort of how do these projects actually work? How do they how do they make revenue?

Sure. No, that's fine. So how do we pick those two countries? So um you know before we set up our business energy storage Africa we um were working in the UK actually and we got involved in some of the first flush of battery projects um in in the UK and so we could see it was a technology that was kind of coming to the fore and we could see a real case for using it in Africa.

We wanted to try and pick a couple of countries where if you could make it work in those two countries you could make it work anywhere. So Malawi on one extreme is a tough place to work. Not because it's, you know, um, crime-ridden or anything else. It's probably one of the safest places we work.

Um, but in terms of kind of the network, the capacity and the people that you have to work with there, you know, it's kind of on the one extreme and Kenya is at the other. It's an largely unbundled electricity system. It's almost European in its kind of look and feel, uh, and is a much bigger system. So we wanted to try and pick two examples almost where we could demonstrate that it works and then try and spread the love and the and the knowledge out around around the around the continent and just someone's first time sort of hearing unbundled like what what does that actually mean in terms of like how the system works?

Yeah. So I guess I guess we take it for granted in in the UK and Europe but effectively in Kenya um the generating company and the transmission company have separated from the distribution business and the distribution business still does all the customer billing. Okay. Um and that business also effectively is our counterpart for um uh the contracts that we have as part of our business.

Um so you know that that that's kind of at its simplest form. So we have to have a transmission agreement with the transmission company and then we have to have our kind of capacity contract with with a single buyer and I can explain a bit more about market model if that's if that's helpful. Let's let's definitely go there. Right.

So so how how do you actually how do you get money? use is is would these assets be intending to sort of trade every day on a wholesale market or is it much more like you provide that capacity to the distribution operator and they pay you on a 15-year contract? Yeah. So, so the way that we work generally is we contract to the state utility and the state utility in most countries buys from IPPs, transmits the electricity and sells it to customers.

Right. So we have to contract with the with the entity that is responsible for buying power from generators whether that's stuff that they own or stuff that IPs come along and provide you know to them private sector providers want to sell to them. So we enter into a contract with what's called a single buyer and they operate in most of these markets and they aggregate all of the generation to supply to their customers uh as a basic rule. So our contracts tend to be up to 20 years.

Um and they're just on a straight capacity and availability charge and then sometimes we have to add in um an activation charge. So not too dissimilar to the way that batteries are used in you know frequency response services for ancillary services markets in the UK and Europe. But but in some ways like very different right. So so sorry.

So so um the use case is similar but the contracting is so different right? So, so in Europe or US, uh we're all looking at like hyper optimized markets where the system operator can pick whichever price it wants from whichever battery it wants and that means there's huge amounts of competition which drives down um the sort of price that people receive because it's like yeah as I said super competitive. Um we've kind of moved away from these longerdated contracts where you can kind of lock in. Um I think that will shock people that they um in a way if you could get comfortable with the the the areas and the counterparties that you're dealing with as you were mentioning at the start actually the the structure of the contract with a 15-year tenor is almost more more financable um uh than you know there's lot a lot of caveats in that right but but there are a lot of caveats in that I don't want to get misqued but but like it's almost more comfortable right in yeah I mean I think I you know the fact that we can enter into a you know as you say 15 to 20 year 15 years in South Africa 20 up to 20 years in other in in other locations against you know uh you know a known utility who has some kind of payment track record as well to to independent power producers to IPPs you know is a great structure and it's very different from from the UK and other markets because obviously here as you say hyperoptimized focus very much on the revenue stack day ahead far ahead as to what they can actually make, right?

Whereas, you know, that's the responsibility almost of our single buyer and the the system operators. Um, so they're then trying to sweat our asset, for one of a better word, as much as possible for their own gain. So, we effectively lock in uh a return that makes our shareholders happy. Um, and then we work with those system operators to optimize the asset to do something each day that they value.

Um and that generally in in Africa for example if you just look at it on a very one simple use case so if in the case of Malawi we store a load of power from hydro run a river hydro plant overnight uh and that's cheap it's 3 4 5 cents a kilowatt hour US cents a kilowatt hour and then we store it and we use it in the morning and then the evening peaks for example and that allay enables the system operator not to dispatch high-speed diesels which are costing 52 cents per kilowatt hour including the fuel in the case of Malawi. So you know there's it enables them to pull down their their system cost and actually reduce the cost to customer which is regulated as well right so you know there are these kind of different ways of looking at the revenue stack the revenue stack is identical to what you would see in UK Europe but the way that that it materializes is actually through cost savings to the utility not through a direct payment to you and that that spread between a few cents for run of river overnight to offsetting diesel generators is an incredibly attractive spread.

It's probably, I'd say, like three times maybe what you might see in a European market. Now, obviously, you're not getting all of that right. So, it's all running through a utility and they they then have to work out like how to dispatch it and they don't pass all of that to you. But, but just the just checking the maths of it, right, that definitely works.

Yeah. Oh, yeah. No, it it it definitely works. But I think what you've got to recognize as well is those utilities are also taking risk, right?

So, they're taking risk on on the dispatch side. So, you know, as far as we're concerned, you know, we need to earn a return which our shareholders are comfortable with and at the same time they're taking risk. So, they need some upside to this as well, right? We're not there just to kind of extract rent as it were and make lots of money and then, you know, just sit back and and and watch.

So, you know, there is a balance of risk because, you know, obviously here you're taking the risk of the revenue stack. In in that case, we're not taking that revenue stack risk um you know, and so on. But what's also interesting particularly in the in the southern African power pool which covers about nine countries in kind of bottom half of of of Africa you know you have now got a kind of emerging kind of day ahead month ahead merchant market. Okay.

Um so you know one of the sites we may well look at how do we trade more of our asset into into that because you still have these huge price swings okay between off peak and peak times. So there's quite a lot that can be done. Um and kind of the peak price clearing at the moment as far as we can see is basically a diesel gen set. So you know if we can do it cheaper than that then we should be able to make money on a merchant basis.

Finding somebody to finance that is is I think let's let's come to the financing in just one second but we've just we've mentioned kind of four techs so far. We've mentioned solar, we mentioned coal, run of river um hydro and then also diesel gen sets. Yeah. And I just want to give people who've kind of got an engineering mindset who just want to like who just want to make sure the cogs are in the right place look like typically in a grid like Malawi or Kenya.

Okay. So they're two completely different grids, right? As well, which is quite interesting. So there's no kind of norm, right?

You're right. If you look around Europe, there's kind of a norm. Yeah. You got a bunch of base load power excluding the French.

excluding the French but you know you know you've got a bunch of base load power that comes from three or four main sources and in in Africa it's you know ignoring South Africa again because it's very coal reliance still you know generally it's quite different so in Malawi um I think the grid is only 550 megawatt of capacity in total so it's very small um about 420 megawatts of that comes from Ronald River hydro and it all comes from one river um which is fed from lake Malawi which is I I think the seventh largest lake in the world. So, it's a pretty big storage pond for those for those Runner River um those Ronald River hydros.

Um and then the balance comes from solar. So, that then breeds inherent, you know, instability and it's got to the point where I don't think they can add much more solar onto the system. Mhm. Because of the frequency and voltage issues that they suffer from without having more batteries.

Mhm. Okay. So, that's that's kind of one. Now, if you Kenya is completely different, right?

So again, you have a river, Latana River, which has a lot of hydro on it and quite a lot. And then there's one hydro plant in the north, which is more of a load follower. It's more of a the kind of peaking plant. Um you then have a load of geothermal which is not a normal not a normal generating kit.

Um obviously Kenya sits on the Rift Valley. Um and you know, you get pretty high geothermal temperatures fairly close to the surface just around the Rift Valley. So places like Suswa uh and Alcaria. Uh so they've got about from memory it's about 500 megawatt of geothermal and they're building more.

Um they've got a load of hydro this huge wind farm. They've got another wind farm called Capeso which is 100 megawatt and then about 3 400 megawatts of solar dotted around down around the country. And again it's it's that's a country which is really on the move in terms of economic growth. And you know they've got to add 10 gawatt plus in in the next 10 years of kind of generating capacity and with that has to come a load of batteries and president himself has actually recognized that and made kind of statements around it.

And 10 gigawatts as a like as a percentage is that oh that's a doubling more than a doubling. So the current capacity is about 3 gaw. So they've got to kind of add a very substantial amount in. You've got kind of Microsoft and all of the other businesses swirling around looking for data centers.

a lot of kind of Google and AI programming actually goes on in Nairobi. Um so you know you you've got quite a lot on the move. You've got big industrial processes trying to start uh you know and so on and so on. And then also similarly in Malawi it it bizarrely sits on some of the world's best rare earth deposits.

Okay. So you've got a load of kind of listed mining companies, Riotinto, various others who are looking at how do they kind of work with the deposits that they've got things like NEOBM graphite uh and just rare earth sands projects um that they need to bring forwards and Malawi's landlocked you can't export the the soil you you've got to process it and suddenly you know 50 100 megawatts is you know 200 megawatts is needed just to satisfy two or three mines. So you've got this kind of huge push towards electrification. Uh and the only way you can do it quickly and I would argue more cheaply than fossil fuels is by deploying renewables with some batteries.

And is that looking sort of typically on grid for Yes. Okay. Yeah. The miners want they have to have 24/7 supply.

So they want certainty and with that then means that you know you need to have quite a lot of reserve and backup which most African countries don't have big reserve margins that we carry here. It's really interesting you kind of um it's a you're absolutely right it's a very different grid but by the same token like loads of the themes that are coming up in other markets are also coming up in these. So like if you take Texas for example a load of the demand comes from West Texas which is um partly driven by oil and gas uh load. So similar similar story to sort of the rare earth piece and then grids running on run river hydro well you know Norway would be an obvious one and so you you um you also your comment around uh Malawi and the amount of solar it's got and the lack of voltage control is a story that we're seeing in Spain right now um and so it's really funny that although they are totally different locations and the the grids have kind of got to different places through their history the the themes that are coming up are actually quite sort of similar.

Yeah, I think that's right. And I think also the other part that you've just got to remember with with with subsaran Africa is just distance, you know, transmission lines, you know, so there's one in Malawi which runs from kind of the central region up towards the north which is probably 350 km long. It's got no generation on it. It's just got a lot of demand at the other end.

So you have huge problems with voltage loss and voltage drop from one end to the other. So, you know, you have to think quite creatively about how you kind of provide support to that and continue to give good quality service to the northern half of Malawi, which is also where some of the mines are located. So, you you've got to do a lot of work um around that. And you're also seeing quite a lot of investment using, you know, donor money.

So that's coming from places like um the UK government through British international investments or whoever or directly from places like the World Bank as grant money. Um but then you're also seeing kind of public private partnerships around the transmission line. So effectively building a transmission line on a on a tolling agreement. So you know you get paid per electron that goes through the system and you know that that all kind of then helps to kind of finance that and finance that spread and that growth.

Um and particularly though also in southern Africa you're seeing a bigger degree of interconnection um as well. So a lot of the countries are you know very quite well interconnected um almost to the kind of volumes and capacities of Europe. There are some bottlenecks in there but you know that they're fairly easy to fix cuz the bottlenecks aren't line capacity. It's actually a transformer capacity.

So, it's switching out, you know, 100 MVA for a 400 MVA transformer, which is a big job and is expensive, but it's not as expensive as having to put up a brand new 400 KV line. Yeah, I think we've started to touch on the finance side. We we let's get into that a little bit more. So we talked a little bit about the major parties putting money into these projects and earlier we also talked about for these projects if you wanted to bundle up the risk element of say dealing with a um a more risky counterparty that might add something like one and a half to 2% maybe onto onto projects.

Is that is that a sort of a fair overview of what you've seen on your projects or would you say there are other parties other key parties involved in in getting these projects to be investable? Yeah. So I mean I think one of the first things that that that you need to just bear in mind is kind of the development process. So you know it's very different from Europe, right?

You have multiple parties involved at different points that development process and different pools of capital that you can access to be able to do that and one flips from one to the next and then bits get sold down and everything else. The secondary market is effectively quite alive so that you've got multiple kind of ways of of kind of securing short, medium and long-term you know financing to get stuff done. there's a very small pool of development capital and it's tiny and it's shrinking which worries us quite a bit. Um but assuming that you can you can you can raise that the next thing you need to have is an investor who's very patient and we're very lucky uh in in that regard.

Um getting these projects from kind of soup to nuts um you know up to the point of construction in Malawi has taken us nearly 8 years um so you know you've got to have people who are patient and are in for the journey um and recognize that it does take some some time. There's a bigger pool of equity available when you're getting closer to construction. So once you've got your kind of key agreements signed, there's a much bigger pool of kind of infrastructure fund type capital that that will kind of rally around you. And then it is actually possible because of the contracted nature of the projects to actually finance them using kind of fairly conventional project finance.

And with that comes though quite a lot of kind of risk rappers you know around it. So there's a lot of prefunded debt service reserve accounts, maintenance accounts, all sorts of things that we have to fund. And in the case of Malawi where there is a shortage of kind of hard currency, we also have to preund kind of dollar convertibility from local currency into hard currency, we have to preund that. So there's there's quite a lot of risk finance wrapping that has to go around it.

But then there are also combination of kind of public sector lenders and I'll explain that a little bit more. But then commercial banks like Standard Chartered, you know, Standard Bank and others who will then come and also join in on as a part of that process of project financing, providing you've got those those kind of risk parts, right? And we also touched on kind of multilateral guarantees, this meager of insurance before, right? So providing that's all in place, it's, you know, you can actually start to get, you know, crowd more money in around you.

Um, which which kind of works. A lot of the projects whether it's batteries or renewables in Africa are generally funded using development finance institution or DFI funds and that comes from places like African Development Bank uh from Pidge which based in London private infrastructure development group uh and then from other kind of development finance institutions. So ours is called British International Investments it used to be called CDC group um there's FMO in the Netherlands and so on. There's a long list.

You see, about 10 minutes ago, you almost convinced me that doing these projects in Africa was going to be was kind of straightforward and had like the European themes and and everyone was going to be sort of finding this now and and I've just listened to the last minute of just how complex and maybe it's not complex, but just how complex it is in terms of building up um maybe it's very straightforward if you know the right people in the right bodies, but it feels to me like you have to have a lot of experience perhaps to be able to navigate that journey. Uh I think there is a bit of that.

Um, and you know, it is a fairly small universe of people that do what we do in Africa, right? So, and we generally know each other. So, you know, it is a fairly a fairly small pool of people, but it's it's kind of growing. Um, and you're getting more kind of locally based develop development kind of starting to take off.

So, people got a bit of experience of doing one thing and then set up on their own and they grow a little bit, which is, you know, which is good. But but I think we you know in terms of financing you know I I'm fairly long in the tooth and I remember you know dash for gas right so that's kind of late 90s early 2000s and financing then was fairly project financing was then fairly complex it wasn't a simple thing um and really what we're talking about here are wellknown welltrodden paths you you've just got to structure it in in in the right way and if you've got a good you know leader ranger working with you then it's pretty easy to structure it in the right way and fairly quickly interesting is getting getting the projects from kind of a bare patch of earth to the point where you've got contracts in place with utility transmission connection agreement in place you know some kind of arrangement with government on enforcability once you've got those that's what's taken us the long time the bit from there to you know cod relatively quick okay let me ask about competition then in that space because in my um less uh experience sort of knowledge of Africa.

I I would think about Africa. I'd think about China and I think sort of like belt and road initiative and this kind of plan that Chinese infrastructure is or China will finance a lot of infrastructure in Africa. To what extent do you do you see that? Um yeah so look we see we see quite a lot of in terms of our competition there's quite a lot of people like us running around doing doing things.

I think that's slightly on the decline to be honest. Um, I think a lot of people are seeking to go to markets where they think that they can do things more quickly or more easily. Um, and and you know, so that that's changing a little bit. Um, we generally don't see kind of Chinese firms coming along and doing what we're doing.

We see them on the EPC side of things. Um, and obviously providing the kit um, particularly around the battery space, not too surprisingly. Um, you know, a lot of it's coming from from that route. But you know what's quite interesting and I think is perhaps slight misconception is is kind of Chinese investment into infrastructure probably peaked about five or six years ago and has really declined over the last four or five years and has become much more focused on specific specific things that that kind of support you know Chinese requirements.

Um so you know they're not going and building you know huge long railways anymore. They're not going and doing certain things. They are doing it in part but it's very focused on yeah on almost the supply chain for manufacturing. Yeah it's fascinating you know so that their level of spend is on on I think on the decline.

Okay well let's go from the the massive sort of geopolitical angle down to the the sort of um nuts and bolts piece of the technical stuff on the ground. So like two totally different ends. How do you find getting sort of technically qualified engineers to do the work, the planners to do the work? Is that is that easy or is it actually you know tell you what that's much easier than we thought.

Uh yeah no it's very difficult right so generally speaking I mean look Malawi is probably you know uh probably the hard of the two places where we're working at the moment you've got a good carder of mechanical electrical civil engineers. You've got you know good accountants and lawyers and all of the professional services that you need but they've just not done this type of thing before. um and probably not done it on the scale that that we're doing it on. So um you know the the the first part is actually we have to spend time with those engineers with those lawyers with those accountants actually just building their understanding and knowledge and the same is true also of government single buyer and so on.

You have to spend a lot of time explaining you know the nuts and the bolts actually right down to a fairly granular granular level. Talent is there it just needs a lot of coaching. I think when we look forwards from where we are now and into operations, there's a lot that has to be done around kind of optimization um you know you talked earlier about kind of super hyperoptimized plants. We we're not going to get to that point, but we do need to have some kind of working algorithms and analysis that optimizes the systems as they are where kind of flow of of of kind of information through you know um scar control systems isn't as good as it is here for example.

So you've got kind of imperfect information, poor gathering and so there's quite a lot to be done on that optimization side of things. And the other part then is just the on andm bit as well. And that's hard because you know you can see a hub uh around batteries being built in South Africa because they're going to be up to about probably 2 GW. Mhm.

Probably about four or 5 G hours of capacity. So the OEMs, the EPCs, they'll have supply chain, they'll have something in the country, right? Yeah. Exactly.

So they'll they'll kind of have stuff in South Africa. South Africa to Malawi is a 2-hour flight. Um, so it's it's kind of like popping up, you know, further north in the UK to go and fix something, but sort of not. So, you know, one of the things that we've got to work on, um, and we are working on at the moment is just how do we build that kind of O andM capability.

Um, cuz we think we've probably got to build bit of it ourselves. Uh, and then we've got to work with OEMs to actually, you know, be able to back a lot of this a lot of this up. And there aren't too many O&Ms that are running around, you know, doing work. When you look in, you know, South Africa, you know, you've got three or four large Chinese suppliers of of battery equipment and they're building their kind of servicing and support hubs.

Um, and it's very difficult to see how you can then avoid using them on the basis that the support infrastructure is then around them. Yeah. And I think uh does that also mean that for those particular projects you then look to do contract in a slightly different way in terms of having spares more locally? Yeah.

Yeah. Yeah. Yeah. So we run you know on our EPC tenders we run much longer supply and spares lists and that also includes the substation spares lists right.

So when we're connecting so Malawi we connect 132 KV um you know we've actually got circuit breakers and other things on our spare spares list for the substation as well as for our plant because obviously we can't cope with the state utility breaking down and not being able to you know to allow us to connect. Fascinating. So if we're sitting here in 5 years time what does success look like for your projects but also for the battery storage story in Africa? Okay.

So for from our perspective um we've got two fairly well advanced and kind of projects that we're we're trying to push on. We've got two or three more in a pipeline. Uh as well for us kind of success means that we get to about 1 and a half gw hours. All of our batteries are 4 hour.

They're not one and two hours. So you know much smaller amount of kind of essential hourly capacity. But um we want to get to about a gawatt and a half uh of gaw hour and a half capacity. uh over the next few years and we think that once we've done got one working then it'll probably be a lot easier for us to to actually do more.

I think when you look across across Africa you know there is this real need to electrify and add an awful lot of capacity in. I think the last set of estimates that I saw were in the next 10 years about 100 gawatt capacity needs to go in. Bigger supply chain questions on wind, solar and geothermal and all the other bits and pieces as to whether you can actually get the kit to do it. Uh and also the transmission system to do it.

But you know conservatively if you just simply want people to consume more electricity, you want to put localized data centers in, you want to support mining and economic growth, you've got to add an awful lot lot more capacity in. The only way you can do that relatively quickly is using renewables, right? So you know and with wind and solar comes intermittency and variability which you know networks have got to manage. And I think you know historically when you look across Africa a lot of peak power has come from heavy fuel oil.

So it's big marine shipping engines not highspeed diesels but also high-speed diesels as well. And they're all starting to come towards the end of their life. So, we've got a really interesting kind of 5year period when you can start to possibly see some of those things being replaced with with, you know, with batteries, which is which is good. But in all these cases, and I think I said this at the beginning, we've got to win the case against fossil fuels because a lot of these countries look at it and they say, "Well, you did it this way.

Why can't we?" So you've got to win this argument on the basis of not just saving the planet reducing reducing climate change but we've got to win it on a largely now actually a pure commercial argument. It makes it makes total sense, right? And and you're running at um in the case of those diesels that sort of 40 cent per kilowatt hour type piece like it just seems crazy that we we can't do that for for less.

And and I really liked your example from South Africa early in terms of the um the batteries that are sort of staged along the transmission line. I think that type of thinking will get us a long way in terms of bringing um you mentioned spindly grids earlier like more sort of to a higher standard of operation. So I'm going to wrap up with a final question uh which is I'm going to um imagine a world where tomorrow you're in charge of the uh uh development of the power system in Africa. Um what's the one thing you change?

What's the one thing that I'd change? I think a lot needs to be invested into people um and kind of human capacity capability. In a lot of the places that we work got really really good people that that are great to work with and we we love working with them and they're they're smart and they know what they're doing but in a lot of places it's kind of three four five six people that you have to work with and there's not much behind it. So that needs to be kind of expanded.

So for me the biggest thing is just continuing to invest as a lot of the kind of international institutions have done in kind of people capacity and capability. So that would be number one. Am I allowed some more? Or you're you're you're definitely allowed you're definitely allowed some more.

I think more funding to go into things like transmission systems and I think there's been a change in kind of model and approach to that using kind of PPP or public private partnership type structures and I think people are quite interested in doing that. you can see kind of grid works which is a UK based company um uh power grid in India and so on now trying to branch out to do kind of more of these things and kind of creating that larger transmission system means that more people get connected drives that economic growth and so on and so on and I think that's that's that's really important and I think yeah that's those for me are probably the two kind of you know biggest things plus that and a bit more development money availability would be would be a nice thing.

Always nice. But that that's just a personal bug bear. But anyway, Michael, thank you very much for coming on. It's been a fascinating conversation.

I think for many of our listeners, this is probably the first time they will have heard lots of this and so um yeah, very grateful for your time and expertise. Thank you. No, really appreciate it. Thanks for the opportunity.